If the stock price decreases, the price of a put option on that stock __________, and that of a call option __________.
A) decreases; increases
B) decreases; decreases
C) increases; decreases
D) increases; increases
E) does not change; does not change

Question

Quizplus · Accepted Answer

A put option gains value when the underlying stock price decreases, as it allows the holder to sell the stock at a higher price than the market. Conversely, a call option loses value in this scenario because it grants the right to buy the stock at a price higher than the current market price, making it less attractive.

If the Stock Price Decreases, the Price of a Put